Trusts for Canadian Residents with Relatives Overseas

The Canadian tax system also allows the children and grand-children of wealthy families a unique opportunity to live tax free in Canada.  Unlike the U.S. and many other countries, if someone who is not a resident of Canada  (“Dad”) contributes assets to a trust for the benefit of a Canadian resident (call him “Son”), provided certain procedures are correctly followed, it is possible for Son to not pay Canadian income tax on the interest, rents, profits and dividends of the non-Canadian assets of the trust.  These trusts are most commonly referred to as “Granny” trusts, because it was often the grandmother in the country of origin that would establish these trusts for their grandchildren.  From a Canadian tax perspective, these trusts, if properly managed, are completely tax efficient.